Prospect Group Funding Investment Synopsis

Secured property finance investment opportunity

New Rates effective as from 1st June 2023. ․

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Prospect Capital has been providing secured property backed loans in the specialist finance and bridging market in the Channel Islands and UK since 2016.

Prospect Capital has built an excellent reputation for ethical, responsible property backed lending in the specialist finance and bridging market. The company’s growth and strong performance is indicative of its ability to generate strong deal origination coupled with a commitment to deliver on the terms set out to its borrowers within the time scale agreed.

Prospect Capital has invested significant resources in developing a unique route to market through its digital marketing programme. This is supported by its own direct sales and marketing activities, which in turn are complemented by a strong network of supporting brokers based throughout the UK.

Loans typically comprise of amounts ranging between £200,000 to £1,500,000 over an average term of 6 to 24 months. Assuming that all the Loan Notes are subscribed pursuant to the Placing, it is anticipated that the loan portfolio could consist of circa 150 individual customer loans. All customer loans will be fully secured against property assets located in either the Channel Islands or UK.

Customer loan advances will be made under the terms of an existing comprehensive underwriting procedure which has evolved over a number of years and which has been instrumental in Prospect Capital’s high quality of underwriting and sound credit decisions.

Valuations are at the core of Prospect Capital’s business. Its panel of valuers generally consists of major national names who have years of experience in their respective fields. The valuer instructed for individual loans will depend on a number of criteria including the location, sector and type of property.

Whilst a professional valuation is mandatory at Prospect Capital, the company also benefits from its own in-house Valuation Verification System (“VVS”). VVS provides an invaluable source of additional data in relation to valuations, which in turn provides a distinctive competitive advantage in the market.

Prospect Capital also uses credit reference and risk screen organisations that allow screening of customer data and in particular a customer’s credit and risk profile, which are utilised in the underwriting process.

It is anticipated that 90% of loans will be made up of UK-based customers.

Loan Portfolio

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Prospect Capital Group’s managed loan portfolio totals circa £60m. This portfolio has not currently experienced any bad debts and Prospect Capital does not foresee this situation changing. The company believes this is due to the fact that all its lending is secured against property assets. Therefore, in the event of a default which can and does occasionally happen, Prospect Capital is able to make a full recovery of the loan capital by exercising its security and selling the property asset the loan is secured against.

Prospect Capital is not currently aware of any factors that would indicate any likely change in the situation outlined above.

Loans are closely monitored through a formal quarterly loan monitoring programme that involves direct dialogue with the borrower to ensure that their plans to repay the loan capital in a timely manner are suitably progressed. As a loan gets closer to redemption, reviews become more frequent depending on the feedback obtained.

Prospect Capital ascribe the absence of historical bad debts to four principal factors:

A B C D

Detailed and robust underwriting procedures that focus on security and minimising the risk of default

Sophisticated risk management and intelligence based upon professional valuations, and its own valuation verification system, supported by a panel of top tier legal advisers

A loan monitoring system that follows closely the progress of individual borrowers to ensure that their plans to redeem their loans are being realised in a timely manner, and

A well-structured security package tailored to each borrower’s loan profile.

Good quality underwriting with sound credit decisions coupled with strong corporate governance, risk management and in-house legal expertise all helps to ensure the long-term security of loan portfolios. Although, ultimately, the security of loan noteholder funds is provided by all customer loans being secured against property assets.

Prospect Capital also provides the added comfort that in the highly unlikely event a customer loan does not get fully repaid, it will make up the shortfall from its own capital, thereby ensuring loan noteholder funds are unaffected.

Loan Note structure

Noteholders

Loan Notes Subscription Monies

Prospect Group Funding (IOM) Ltd (Issuer)

Prospect Capital Loan

Security Interest over bank account & Prospect Capital loan facility

Prospect Capital Ltd

Security Interest over bank account & customer loans

Customer Loans

Security Trustee (Trust of security interest in favour of Noteholders)

Loan Note Holders

An Isle of Man Special Purpose Vehicle has been incorporated (Prospect Group Funding (IOM) Limited) which will:

• issue Loan Notes up to the value of £50,000,000 with a minimum investment of £85,000.

• lend under the Loan Facility with Prospect Capital, which it will use to make loans to Customers, of the profile described above.

• interest will be payable on the Loan Notes monthly or quarterly, as selected by each Noteholder. The rate of interest on the Loan Notes will vary depending upon the payment period selected, as described on page 01.

• Prospect Capital will meet all operating costs of the issuer, Prospect Group Funding (IOM) Ltd.

• security will be provided through an appointed independent Security Trustee who, through a declaration of trust and security agreements, is able to take control of all loans issued with Noteholders’ funds. Any funds loaned by the issuer to Prospect Capital and not utilised in making customer loans will be held in a separately designated bank account, which is subject to a security interest agreement in favor of the Security Trustee.

• verification of the loans subject to the security outlined above will be carried out by the Security Trustee on behalf of Prospect Group Funding (IOM) Ltd on a quarterly basis.

Prospect Group Funding (IOM) Ltd will use the proceeds raised from the loan notes to provide a Loan Facility to Prospect Capital. These funds will be used exclusively to make customer loans as described above which will be monitored by the Security Trustee.

Security Interest Agreements will be entered into creating security in favour of the Security Trustee for the benefit of all Loan Note Holders, over:

1 2 3

Prospect Group Funding (IOM) Ltd and Prospect Capital’s segregated bank accounts.

The loan from Prospect Group Funding (IOM) Ltd to Prospect Capital.

The Customer Loans issued by Prospect Capital.

Under the terms of the Security Interest Agreements there will be a number of default triggers. If a default occurs the Security Trustee will take possession of the customer loans and the designated bank accounts. These assets will be held by the Security Trustee for the exclusive benefit of the Noteholders.

The events of default under the Security Interest Agreements will include:

1

2

Prospect Capital or Prospect Group Funding (IOM) Ltd becoming insolvent or ceasing to trade; and/or

Prospect Capital or Prospect Group Funding (IOM) Ltd failing to pay the Coupon when due (except as a result of error or the failure of any payment system used to make those payments).

Repayment of Loan Note

The Loan Notes will be repaid on request at the end of the Issue Period.

The Loan Notes will be transferable.

Prospect Group Funding (IOM) Ltd will have the right to repay a Loan Note in full, or part thereof, at any time.

This information is an advertisement and not a prospectus. It does not constitute an offer, or an invitation to purchase, securities. Investors should not purchase or subscribe for any securities referred to in this advertisement except on the basis of information contained in the prospectus which is available from investment@prospectcapital.je or www.prospectgroupfunding.com or at the registered office of Prospect Group Funding (IOM) Ltd, Fort Anne, Douglas, IM1 5PD, Isle of Man.

Loan Note Issued by Prospect Group Funding (IOM) Limited reg no 017999V.